After deeply flawed elections, President Robert Mugabe will retain the presidency with 61 percent of the vote, foregoing the need for a run-off. Mugabe's victory was expected, but the scope and the effectiveness of ZANU-PF's tactics (fraud, intimidation, and co-option of traditional leaders) were a surprise.
Mugabe's victory now sets the stage for a succession battle within ZANU-PF that will be the key driver of future economic policies. The two main factions are Minister of Defense Emerson Mnangagwa's hardliner/securocrat group and the so-called reformers associated with Vice President Joyce Mujuru. Mujuru will take over as de-facto head of state should the 89-year-old Mugabe die while in office, though her tenure could be short if the party discards her in favor of a securocrat to formally succeed Mugabe as president.
Unlike the mining- and agriculture-focused hardliners, Mujuru and her allies are vested in industries such as finance, retail, and hospitality that demand more rational and pragmatic economic policies to grow. As a result, a Mujuru administration could move to dilute the impact of the Indigenization Law on the banking sector and pursue more engagement with international investors -- and perhaps the IMF on a multi-year loan facility. Mujuru would probably have to concede to the securocrats their interests in diamonds, agriculture, and wildlife tourism and assure them of immunity from prosecution for human rights abuses in order to secure the reforms.
Mujuru has more popular support than the securocrat/hardliner candidates such as Mnangagwa or army chief Constantine Chiwenga. But the securocrats have the upper hand politically. Not only do they control most of ZANU-PFs coordinating committees, but they will also find it easier to secure military support. A hardline successor to Mugabe would be more brutal, but probably less ideological and would likely reverse the partial democratic gains made in recent years and move to assert their economic interests with force but a less explicitly anti-Western, resource-nationalist agenda than did Mugabe.
In this scenario, Zimbabwe becomes more of a classic kleptocracy that is a more unpredictable, onerous, and potentially dangerous destination for investors without connections, but possibly a more profitable place for those with access to those in power.
Mark Rosenberg is a senior analyst with Eurasia Group's Africa practice.
ALEXANDER JOE/AFP/Getty Images
Algeria's President Abdelaziz Bouteflika has been hospitalized in France for more than a month, even longer than his extended convalescence from stomach cancer about ten years earlier. The illness has reopened the succession issue and set off maneuvering among Algeria's political and military elite (the pouvoir). The extended hospital stay also ends any chance that Bouteflika will consider running for another term. Notwithstanding the rosy assessments of his recovery from his administration and supporters within his political clan, other clans will argue with some reason that he is too weak to withstand the rigors of campaigning, and is unlikely to survive another term.
There are now three basic scenarios for the Algeria succession. In the first and most likely scenario, Bouteflika finishes out his current term as president while Algeria's rival political groupings jockey to secure the nomination ahead of the 2014 election. In the second and somewhat less likely scenario, Bouteflika either steps down through ill health or dies and the rival clans successfully handle a managed transition. The least likely scenario sees the military takeover the country after the rival clans fail to agree peacefully on a replacement.
What is certain, however, is that the transition will dominate the political scene in Algeria and the authorities will have little time to focus on policymaking until the issue is resolved, probably in late 2013, perhaps with ramifications for the oil and gas industry, and security in North and Sub-Saharan Africa.
The current ruling clan has not groomed any successor acceptable to the other factions and the next president will need to win the support of the regime's main groups. In the past, this situation has allowed formerly marginalized politicians to surface as compromise candidates. The presidents Chadli Benjedid in 1979, Mohamed Boudiaf in 1992, and Bouteflika himself in 1999 secured power through this mechanism. As a result, early possibilities to replace Bouteflika include the former president Liamine Zeroual, and former prime ministers Ahmed Ouyahia and Mouloud Hamrouche. This is the early speculation, however, and many other names could rise to the top in coming months.
Riccardo Fabiani is an analyst with Eurasia Group's Middle East and North Africa practice.
FAROUK BATICHE/AFP/Getty Images
Nelson Mandela's deteriorating health over the past year has spurred speculation about what impact his eventual death will have on South Africa. Both inside and outside the country, there is a (somewhat overblown) fear that his death will strike at the country's soul. Mandela certainly occupies a central place in the country's self-image, and his death will be an occasion for national mourning. But beyond that -- and the possible impact on approaching elections -- his passing will likely have little effect beyond accelerating somewhat the social and political trends already at play. The political dominance of the African National Congress (ANC) will continue to unravel, and South Africa will continue its rocky but ultimately stable transition to post-revolutionary politics.
Should Mandela die before the May 2014 elections, the ruling African National Congress (ANC) will exploit Mandela's golden reputation to remind voters of its liberation credentials and reinforce the message that voting for the ANC is a vote for Madiba (Mandela's Xhosa clan name). This propaganda will help shore up ANC support in the Eastern Cape, Limpopo, and North West and may even pry more votes from disenchanted urbanites and the so-called born-free generation, who are less tied to the ANC historically but who consider Mandela a national father figure. In this scenario, the ANC would garner about 60 to 64 percent of the vote, down from the 66 percent support seen in the 2009 election, but handily above the 57 to 61 percent range that would be likely without this Mandela-effect.
This electoral boost will not last long, though, and Mandela's death will ultimately hurt the ANC precisely where it may initially help: by further de-coupling the ANC from the liberation struggle and shining a spotlight on unmet economic promises and worsening corruption in the party. As a result, citizens will be even more inclined to step outside the party and its affiliated institutions -- including members of the ANC-linked Confederation of South African Trade Unions (COSATU) -- to press their demands. Popular discontent will continue to fuel and be fueled by the ANC's and COSATU's factionalism, and South Africa will see more violent strikes and "service delivery protests" in peri-urban communities. In the shorter term, the ANC's declining legitimacy will continue to dampen turnout rather than drive support for any opposition party. Over the longer-term, however -- probably by the 2024 election, but perhaps by 2019 -- it opens up space for the emergence of a viable opposition coalition.
A number of alternative political organizations will try to capitalize on the ANC's comparative decline. Middle class blacks will likely vote in greater numbers for the liberal Democratic Alliance (DA) or for the party that emerges from a potential merger between the ANC offshoot, the Congress of the People (COPE), and Mamphele Ramphele's new Agang party. Apart from the perception that the DA is still a "white party," there is little blocking a broader coalition between the DA, COPE, Agang, and perhaps the Eastern Cape/Xhosa-based United Democratic Movement, whose leader, Bantu Holomisa, has made political hay of last year's Marikana massacre. Some poorer blacks would also vote for this coalition, particularly given Ramphele's liberation credentials and Xhosa discontent with the growing Zulu influence in the ANC. This kind of formal coalition is likely by 2019. Before then, opposition parties will continue to increase legislative coordination, including ongoing efforts to secure a (sure-to-fail but symbolic) vote of no-confidence against President Jacob Zuma.
A viable challenger on the ANC's left flank remains unlikely -- particularly because the ANC will likely move left to try counter its decline and take a more populist line on land reform and mining (two fixed assets with strong symbolic ties to the struggle against white minority rule). Zuma has effectively sidelined former ANC Youth League leader Julius Malema, and he probably does not have enough mass support or funding to launch a revival campaign from the outside. COSATU's Secretary General Zwelinzima Vavi could organize a more radical party, and efforts by Zuma's allies in COSATU to purge Vavi for his criticisms deserve close attention. Still, while Vavi is respected both inside and outside COSATU, he is not a rabble rouser like Malema, and most unionists (particularly increasing influential public sector workers) would remain inside the ANC-linked COSATU following his ouster.
The ANC itself is more likely to fracture along provincial/ethnic lines than by ideology, especially if current ANC Deputy President Cyril Ramaphosa -- a former labor leader-turned-billionaire and one of the key architects of the country's negotiated transition to majority rule -- is not elected party president at the ANC's 2017 conference. Zuma's alliance with Ramaphosa at last year's ANC national conference in Manguang was driven by political expediency, and Zuma acolytes in Kwa-Zulu Natal are already plotting to replace Ramaphosa with a Zulu candidate at the 2017 conference. If so, party factions in the Gauteng, Eastern Cape, Gauteng, Free State, and Limpopo could lead a split in the party.
Such a split and the ANC's more populist orientation represent the clearest threats to South Africa's long-term stability. Nevertheless, South Africa's strong social and economic institutions -- including a widely respected constitution, independent judiciary, adversarial media, robust civil society, large tertiary sector, independent central bank, and a prudent treasury -- will impede more radical policy shifts and facilitate reforms in the face of sustained market pressure that will accompany the economy's slow leak under the ANC. In addition, by virtue of its declining share in parliament, the ANC now cannot amend the constitution on its own, and previous attempts to significantly weaken the judiciary, media, and civil society have generally been repelled. In the same vein, established electoral, legislative, and judicial institutions will likely contain political violence and help clear the way for a more competitive political environment.
Mark Rosenberg is a senior analyst with Eurasia Group's Sub Saharan Africa practice.
Chip Somodevilla/Getty Images
A generation ago, many wondered how many years would pass before American dominance and, by extension, the clout of Western-led financial institutions like the IMF and World Bank faced a serious challenge. So far, no single rival has proved its staying power. For better and for worse, the IMF and World Bank remain core components of international politics and development. And that's what makes collective action among the BRICS-Brazil, Russia, India, China, and South Africa-so intriguing. The BRICS carry considerable weight as models for the next wave of developing countries-particularly following an American-made financial crisis and ongoing turmoil in the Europe.
It's no surprise then that plans announced last month to create a BRICS development bank have generated so much buzz. In particular, the ability of leading emerging market governments to finance big infrastructure construction projects across the developing world has interesting potential implications.
Yet, for many of the same reasons that the BRICS have so far struggled to institutionalize a working partnership in other areas, this bank will take longer to build than its architects think and will never realize the grand ambitions of its most forceful advocates.
It's no secret that Brazil, Russia, India, China, and South Africa are home to quite different political and economic systems and face different sorts of challenges. Less well understood is the diversity of their interests in creating a bank. Questions of seed money, oversight, purpose, and where the bank might be headquartered are certain to arouse controversy.
But the larger problem is that all the BRICS except China are grappling with sharper-than-expected economic slowdowns-and Brazil, India, South Africa, and Russia are all looking to spend their revenue on infrastructure projects at home to help bolster growth. For the moment, none of them can afford to invest substantial sums to build someone else's roads, bridges, and ports.
These governments face a choice. They can contribute to a BRICS bank funded in equal (modest) parts by each member and lacks the capital to accomplish much. Or they can lend their names to a much-better funded institution that is thoroughly dominated by China.
Yes, Brazil's government is interested in promoting a South-South development strategy, but the Dilma Rousseff administration is now focused mainly on reviving domestic growth following a significant slowdown last year. Its strategy rests in part on using state development bank BNDES to fund ambitious infrastructure projects inside Brazil. If the BRICS bank can be used to finance projects outside Brazil to which BNDES is already committed, it might be useful, but don't expect the Rousseff administration to offer significant new cash commitments toward these projects.
Russia's government, also faced with sluggish growth, will talk up the need for a counterweight to U.S.- and European-dominated institutions, but tepid pledges of support for the bank from Russia's finance minister and the recent tragicomedy in Cyprus make clear that Moscow is not ready to finance its bid for greater international prestige with substantial sums of cash.
Political officials in India, where national elections loom next year, are too preoccupied with a steady stream of domestic troubles to devote much capital to a BRICS development bank, and the government remains deeply ambivalent about its often troubled relations with fast-expanding China. That's in part why India's finance minister has said that the BRICS bank will complement, not challenge, existing international lending institutions.
Then there is South Africa, a country with a growing middle class but chronic high unemployment and an economy the size of China's sixth largest province. The ruling African National Congress sees obvious value in deepening trade and investment relations with China, but its greatest near-term contribution to a BRICS development bank will probably be limited mainly to providing its headquarters a home.
Finally, the bank faces obstacles even within China, the one country than can afford to give it heft. China already has a development bank. It's the most powerful financial institution in the country, one that answers only to the State Council, giving it the status almost of a government ministry. In fact, though the China Development Bank and the China Export-Import Bank may lack the perceived legitimacy of multinational institutions, they don't lack for borrowers. Together, they already lend more to developing countries and companies -- more than $100 billion per year -- than the IMF and World Bank do, extending China's strategic influence throughout Africa and Latin America, in particular.
Why share credit and benefit for these efforts with the other BRICS, especially when the rest have so much less to contribute? And why give others a say in where Chinese funds are invested?
All five of these governments have an interest in choreographed displays of unity and rhetorical challenges to U.S. power. But like so many other aspects of BRICS cooperation, there is less to this bank than meets the eye.
Willis Sparks is director in Eurasia Group's global macro practice.
ALEXANDER JOE/AFP/Getty Images
Eurasia Group's weekly selection of essential reading for the political risk junkie -- presented in no particular order. As always, feel free to give us your feedback or selections via @EurasiaGroup or @IanBremmer.
How does "a quaint historical pageant played out with live ammunition" erupt into what could become a full-fledged guerilla war?
By P.W. Singer, Foreign Policy
So much for the U.S.'s perceived monopoly on drones. There are at least 75 countries using unmanned aircraft in their militaries. As the technology spreads into more hands and more sectors, what impact will that have?
By Joe Leahy, Financial Times
This week, Brazilians were confusing the World Cup and the Holy Grail. Losing out to Argentina in the papal selection was painful, but it was a victory of sorts: Brazil is celebrating the first-ever pope from Latin America, a region that is home to 40 percent of the world's Catholics.
By Cris Chinaka, Reuters
What can we expect in Zimbabwe's upcoming elections? The population's median age is 33 years old -- more than half of Zimbabweans were born after independence in 1980. How will an increasingly youthful electorate impact the aspirations of an aging mainstay like 89-year-old president Robert Mugabe?
By Barbara Demick, Los Angeles Times
It turns out the lifestyle of a Chinese hacker isn't all it's cracked up to be. This rare glimpse at the day-to-day life of a hacker in the Chinese army is fascinating.
By Risa Grais-Targow
Beginning what he says will be his final five-year term as Cuba's president, Raul Castro surprised Cuba observers this week by appointing Miguel Diaz-Canel as first vice-president. At 52, Diaz-Canel is a spring chicken compared to Jose Ramon Machado Ventura, his 82-year old predecessor, and it appears generational change within the leadership might finally be on the agenda. Though Raul Castro, 81, appears in good health, Diaz-Canel would automatically assume the presidency if Castro is forced to step aside before 2018.
What does all this mean for policy? In the near-term, probably not much. Under Raul's leadership, the government has embarked on an incremental path toward economic liberalization while keeping a tight lid on political reform, and that's unlikely to change anytime soon. Diaz-Canel seems to have been selected precisely because he is both a trusted Communist Party loyalist and a proven manager who can balance the delicate process of gradual economic opening with the need to work closely with the still-influential first generation of revolutionaries within Cuba's politburo. Diaz-Canel, a former education minister and an engineer by training, has slowly worked his way through the party ranks. He served two years in the military and reportedly maintains close relations with top brass. He is not particularly charismatic, but, then again, neither is the man he's now in line to replace, who assumed power after older brother Fidel relinquished the reins in 2006.
The appointment suggests the Castro regime knows it must finally address the issue of succession. Raul has repeatedly called for a "rejuvenation" of Cuba's Communist Party but seems to have struggled to find an appropriate mix of loyalty and reformist credentials, particularly within the generation born after the 1959 revolution.
Still, there is no guarantee that Diaz-Canel will be Cuba's next leader. Other would-be heirs -- most notably Carlos Lage and Felipe Perez Roque -- have been groomed for succession in the past only to fall from grace after demonstrating an excess of personal ambition or clashing with Raul and Fidel. Moreover, though Diaz-Canel has the legitimacy that comes with Raul's backing, his last name is not Castro, and any transition will likely be challenging, particularly given Cuba's deep economic troubles, tensions within the ruling party, and intense pressure from the international community to implement political reforms.
Still, promoting Diaz-Canel suggests that despite the Castro brothers' seeming immortality, the regime is truly committed to "updating the model" to ensure the system they built continues after Raul and 86-year old Fidel are gone. This also includes continuing economic reforms aimed at slowly and carefully expanding the size of the private sector and reducing state payrolls.
Whether these reforms can keep the regime in power beyond the Castros, however, remains to be seen.
Risa Grais-Targow is an analyst in Eurasia Group’s Latin America practice.
ADALBERTO ROQUE/AFP/Getty Images
The future of Myanmar's National League for Democracy (NLD) seemed preordained when the trammels of political repression were removed in 2012. The party would parlay the popularity of its leader Aung San Suu Kyi and coast to victory in the 2015 elections over a ruling party led by widely despised former generals. But democracy is messy, and even its most fervent adherents can slip once the real challenges of governance and politics surface.
The NLD has stumbled in the past few months and its trajectory is now less certain. The party faces a growing list of constituent demands and the ruling Union and Solidarity Development Party (USDP) has demonstrated a talent for political maneuvering that is improving its outlook.
The NLD's internal disorder is in part a natural consequence of having to shift its focus from opposing a hated military government to winning an election in a diverse country. Burma has 135 recognized ethnic groups, many of which live along the eastern, western, and northern borders. Some of them have never yielded to rule by an outside force, making the majority-ethnic Burman NLD's task of building an effective national party more difficult. But the party has also been accused of mishandling internal party elections, delaying the first party congress until the second week of March. Several hundred disgruntled members defected from the party in Pathein several months ago, and recently party members gathered in Mandalay to protest party election fraud. The aging party leaders are also rumored to be excluding party youth from the policymaking process, which could result in more defections that could bolster the NLD's competitors or provide the core of new parties ahead of the 2015 national elections.
Aung San Suu Kyi's new role has also forced her to make compromises that have alienated some would-be NLD supporters. She has exhibited greater pragmatism and less ideological conviction in her role as member of parliament than she did as an activist. Though her silence on the Rohingya humanitarian crisis is less problematic in Myanmar than it is among international donors, Aung San Suu Kyi has not won allies through her silence on the conflict in Kachin State. Her silence may cost the NLD dearly if it finds that it must rely on ethnic parties to form a ruling coalition after the 2015 elections, much as the NLD did in 1990 when it formed an alliance with ethnic coalition the United Nationalities League for Democracy.
Meanwhile, the USDP has improved its ability to govern, thanks in part to personnel changes that have promoted technocrats and its experience with the exercise of power. The USDP has been increasingly vocal about taking credit for the recent political liberalization, and as economic liberalization begins to improve the standard of living, the party's leaders will no doubt seek to burnish the USDP's reputation. From a policy perspective, this means that development will likely be steered toward areas that return the biggest, quickest, and most obvious improvements in living standards, which includes areas such as electrification, telecoms, and agriculture.
Finally, the USDP will use the familiar divide-and-rule tactic of the past, working to undermine their opponents by fostering personality-based rivalries and distrust across ethnic lines. The USDP and military have pursued an aggressive effort to broker ceasefire deals with 11 groups since November 2011, whom they will then encourage to register as political parties. If successful, this tactic will force the implicit acceptance of the 2008 Constitution by Myanmar's ethnic groups and will also present the NLD with new challenges in minority ethnic electoral districts. And if the NLD cannot improve its relationship with ethnically based parties -- either because of concerns about the selection of local party officials or because of its silence on the Kachin -- then it may find itself competing with them instead of building a coalition. That outcome would divide the opposition vote and cede the advantage to the USDP.
Similarly, in an effort to raise the stock of the breakaway NLD competitor, the National Democratic Force, President Thein Sein on Feb. 6 appointed one of its members of parliament as the first non-USDP cabinet minister. And if Thein Sein feels he can succeed, he may also encourage the pro-democracy group, 88 Generation Students (88 GS), to form a party. The organization's moral authority in Myanmar approaches that of Aung San Suu Kyi, and an 88 GS party would challenge NLD's pro-democracy bona fides.
The result is that the NLD is too weak to shape the reform agenda for the next three years, and perhaps longer. Aung San Suu Kyi is probably aware of this and as a result will be careful not to overreach and risk alienating international stakeholders. For the USDP's part, Thein Sein and his cabinet will continue with reforms that are intended in part to gradually legitimize both the military and the USDP while entrenching their privileged economic and political positions.
Christian Lewis is a researcher in Eurasia Group's Asia practice.
Ye Aung Thu/AFP/Getty Images
Note: Today is the tenth in a series of posts that detail Eurasia Group's Top Risks for 2013.
Jacob Zuma's reelection as ANC president will hasten the decline of South Africa's dominant political party and increase social pressures on the continent's most advanced economy. As elections loom in 2014, critical reforms will fall victim to more populist policies.
On the surface, the ANC's December 2012 national conference at Mangaung struck a surprisingly market-friendly tone: Zuma and his allies defeated his most populist challengers, elected labor-leader-turned-tycoon Cyril Ramaphosa as deputy president, dropped any mention of nationalization from the party's platform, and rammed through an endorsement of the pragmatic National Development Plan (NDP). But beneath the surface, worrying trends have become apparent.
The ruling party's policy of strategic state ownership introduced further policy uncertainty to the mining sector (especially on taxes) and paved the way for a heavier state presence in industries like energy and steel. The government is now more likely to use the threat of new taxes to try to secure cheaper inputs for state-run energy and infrastructure projects.
The NDP will probably provide too little, too late. The plan's most critical reforms -- more flexible labor laws, education reform, and rationalizing local government -- will probably be scuttled by vested interests and weak governance, and its 20-year plan for expanding employment and reducing inequality is too broad and too long term to offer much-needed near-term help. As a result, the plan's more populist elements -- including boosting public-sector employment and social spending -- will be implemented first, further limiting government's ability to find longer-term, structural fixes. Ramaphosa's business experience and negotiating skills will help the NDP's cause. But the plan lost its primary champion when former finance minister Trevor Manuel resigned from the ANC's National Executive Committee.
Zuma's demonstrated ability to survive internal challenges will relieve some of the factional pressures within the ANC leadership: All top six party executives are now Zuma allies, and the president's most vocal challengers were uniformly eliminated from the 80-member NEC. Yet this winner-take-all outcome will also reduce the ANC's so-called broad church of leaders and supporters, further undermining the party's monopoly on political legitimacy among black South Africans and increasing the risk of social unrest.
Despite its electoral dominance -- the ANC won 65.9 percent of ballots cast in 2009 -- growing voter apathy and discontent with the pace of economic change has substantially reduced turnout, meaning the ANC now has the support of just 50 percent of registered voters. Anger over inequality has also driven a rise in violent protests, including frequent demonstrations against poor service delivery and last year's wildcat strikes in mining and farm communities. In general, these actions have been instigated by disgruntled or former ANC-affiliated leaders trying to exert influence from the outside.
These trends will continue in 2013. The new ANC leadership will alienate leaders and constituencies from the same areas where protests and strikes are most common, and government efforts to exert tighter control over provincial resources will exacerbate local tensions. Cutbacks and shutdowns by gold and platinum miners in the first half of 2013 -- as well as the June expiration of wage agreements in the gold and coal sectors -- will almost certainly spark another bout of labor unrest in the mining sector, especially given the weakened position of the government-aligned National Union of Mineworkers and the rise of more militant bodies such as the Association of Mineworkers and Construction Union. Combative stances are also likely from the Congress of South African Trade Unions.
The bottom up pressures will weigh on the ANC in advance of the 2014 elections, as will the scandal-plagued leadership of Zuma himself. Though Ramaphosa's respectability provides the party with badly needed cover, the ANC government will still have to focus on short-term spending and patronage to shore up support. Looser monetary policy is also a real possibility, as is a more aggressive (though still tempered) approach to land reform. Without these steps, continued bouts of social unrest may well shake investor confidence more than unwelcome policies.
Bottom line: Zuma is not Nelson Mandela, and the ANC no longer has enough credibility with poor South Africans to (once again) ask for patience in achieving a better life.
Next, we'll profile our "red herring" risks for 2013.
Spencer Platt/Getty Images
Note: Today is the ninth in a series of posts that detail Eurasia Group's Top Risks for 2013
With slow growth, persistent inflation, and large fiscal and current account deficits, India desperately needs to implement a range of economic reforms. But due to its own shortcomings and a constraining political environment, the ability of the Congress party-led United Progressive Alliance to tackle structural problems is limited -- and will wane further in the run-up to national elections.
Elections are due by May 2014, and the Congress party is scrambling to shore up its popularity in the wake of high-profile corruption scandals. Other coalition members and issue-based supporters, sensing weakness, will try their hardest to extract political concessions from the Congress while the opposition Bharatiya Janata Party (BJP) will likely remain relentlessly obstructionist in its quest to regain power.
Consequently, parliamentary gridlock will persist, with only minor administrative reforms politically feasible in 2013. P. Chimdambaram's return as finance minister in July 2012 has buoyed foreign investor confidence and market sentiment, but he needs to make deep, politically difficult spending cuts to improve India's chance of averting a sovereign credit downgrade to junk status.
And parliamentary elections are not likely to lead to an improved policymaking environment. Like the Congress party, the BJP is in the throes of a prolonged leadership transition and has been largely unable to capitalize on the decline in public support for Congress. This leadership vacuum has enhanced the influence of swing regional and state parties. Elections will likely result in a hung parliament and an even more unstable coalition that will be capable of approving only lowest-common-denominator policies.
Growth will improve in 2013 but India will likely miss its fiscal deficit targets of 5.3 percent of GDP for fiscal year 2012-2013, and 4.8 percent for fiscal year 2013-2014, without substantial subsidy cuts unprecedented in an election year budget.
Expectations for India's performance in 2013 are limited. While it can hope to accomplish just enough on fiscal policy and economic reforms to avoid a sovereign downgrade, India will make negligible progress on structural problems that have long vexed its economy.
On Wednesday, we'll profile Risk #10: South Africa.
Daniel Berehulak/Getty Images
Note: Today is the seventh in a series of posts that detail Eurasia Group's Top Risks for 2013
East Asia's geopolitical stability will continue to deteriorate this year. Countries such as the Philippines, Vietnam, and Japan will take tougher stances on territorial disputes with China and seek to involve Washington more closely in these issues. But China's new government will find it difficult to compromise and may even take more forceful positions given its need to consolidate internal support and channel growing nationalism. Meanwhile, the US will continue to enhance engagement with Asian partners -- particularly on the economic side -- which will raise skepticism in Beijing.
The most worrying concern during the early part of 2013 will be the Senkaku/Diaoyu islands, claimed by both China and Japan. Tensions surrounding the islands spiked in late 2012 following the Japanese central government's decision to purchase several of them from their private owners. The growing presence of Chinese ships and aircraft in surrounding waters is stoking nationalist sentiments in Japan and increasing the risk of a clash that could quickly escalate and ensnare the world's three biggest economies in an ugly dispute.
In 2013, regional governments will lean toward political considerations more than economic ones. In Japan, a new government led by the Liberal Democratic Party (LDP) Prime Minister Shinzo Abe will become more assertive on foreign policy issues. The LDP was able to capitalize on nationalist sentiments in its campaign, and Abe will carry through with some of his promises in 2013 by establishing a more assertive national security and foreign policy posture. Abe will also bolster the U.S.-Japan security alliance and likely commit Japan to joining the Trans-Pacific Partnership (TPP) negotiations. China will regard such moves as confrontational.
Meanwhile, Beijing's appetite for compromise will be limited. China's political transition will make it more difficult for Beijing to be flexible on foreign policy issues. The country's new leaders will need to consolidate internal support. Moreover, growing middle-class expectations and concern over the state's control of information are expected to encourage a more nationalistic foreign policy. If Beijing faces a foreign policy test, the incoming administration might feel the need to demonstrate its foreign policy mettle and avoid being seen as capitulating to outside interests.
Policies toward Asia from the U.S. will not change much: The rebalancing of its attention toward the region will continue, with more substance on the economic than on the strategic side. In particular Washington's trade negotiators will focus on negotiations for the TPP talks.
The South China Sea will be another hotspot. There has been relatively little tension there in recent months, but that calm is unlikely to continue. Vietnam and the Philippines, in particular, will maintain their aggressive postures toward China. Neither country has an interest in provoking a military conflict, but domestic politics make it difficult to back down without a perceived (even if minor) but unlikely concession from Beijing.
Later this week, we'll profile Risk #8: Iran
GOH CHAI HIN/AFP/GettyImages
On the face of it, Davos doesn't seem to make much sense. For business and political leaders who are increasingly mistrusted by the public, cloistering themselves in a luxurious mountain redoubt for a week seems like a good way to sharpen the perception that they are far removed from the interests and concerns of their constituents. And in a world of ever-proliferating global forums -- TED and Google Zeitgeist for the techies, Clinton Global Initiative for the high-minded policy and business types, the list goes on -- the World Economic Forum (WEF) has a bit of an identity problem. Aside from the invigorating alpine freshness, the good skiing, and the chance to meet Charlize Theron, is there any reason to come here? And does what happens here still matter at all?
Yes. For why, see my Foreign Policy piece here on why Davos is more than just a ski camp.
Note: Today is the sixth in a series of posts that detail Eurasia Group's Top Risks for 2013
While the immediate crisis has subsided, risk still emanates from Europe in 2013. First, the process of institution-building to address the flaws of the eurozone structure will continue to be halting, especially in light of major elections in Italy and Germany. And second, many eurozone countries face recession or stagnation, which could test the eurozone structure in new ways.
To be clear, as in 2012, the risk of a eurozone break up is minimal, primarily because the European Central Bank has made clear it will do whatever it takes to preserve the euro. But the muddle-through approach presents risks in 2013, just as it did in 2012.
Germany heads to the polls in September. While Chancellor Angela Merkel has gained the strong backing of the German public for her handling of the eurozone crisis, the current government will be loath to contemplate any major new institutional or funding moves that might upset the careful balance she has struck. The most pressing concerns are policies allowing the direct recapitalization of eurozone banks and the building of an ambitious fiscal and banking union.
Italy holds elections on February 24-25 in which anti-austerity and populist parties could win more seats. Such a government would likely struggle to provide political stability, the reform drive could suffer, and financing costs could again rise.
Beyond the political calendar, a number of factors could test the temporary eurozone equilibrium. If France fails to hit budget deficit targets, President Francois Hollande's government will probably have to enact additional spending cuts and some tax hikes. Spanish Prime Minister Mariano Rajoy is unlikely to ask for financial assistance from the eurozone's new permanent bailout fund absent market pressure. But should that pressure arise, Spain would ostensibly have to agree to reform commitments stipulated by the ECB's agreement to purchase the country's bonds in the secondary market. Those commitments are likely to be met with resistance in hard-hit Spain, putting the ECB in a quandary: If Spain refuses to meet the conditions, does the ECB loosen its requirements, potentially encouraging moral hazard in other member states, or does it insist on reforms and potentially withhold assistance that could cause a new conflagration in the eurozone?
Later this week, we'll profile Risk #7: East Asian geopolitics.
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Note: Today is the fourth in a series of posts that detail Eurasia Group's Top Risks for 2013.
With the votes counted and the cliff averted, 2013 ought to be a year of substantial legislative accomplishment. Term limits ensure that President Obama can afford to be bolder than a first-term president in offering up concessions in exchange for tangible policy achievements. Republicans, eager for better vote results in 2014 and 2016, should be ready to prove they can get positive things done. The U.S. economy looks set for stronger growth. On energy (the shale revolution) and trade (the Trans-Pacific and Trans-Atlantic deals), there are game-changing possibilities to be had. On immigration, the two parties have incentives for cooperation, and both Democrats and Republicans have said that entitlement and tax reform are needed to boost long-term, sustainable growth.
Unfortunately, we can expect another year of zero-sum partisan combat. Elected officials from the two parties are now appealing to increasingly separate constituencies with quite different values on questions of budget and borrowing. A significant number of House Republicans worry more over primary challenges within their reliably conservative districts than about damage to their party's national brand. Democrats, in turn, have seized on issues like immigration reform and women's health issues to deepen their support with groups they believe Republicans are alienating. Obama says he will not negotiate over the debt ceiling. House Speaker John Boehner vows to never again negotiate privately with Obama.
Add volatility elsewhere in the world and the conviction among many investors that the U.S. remains the safest port in any storm, and complacency has begun to take root in Washington over the need to correct chronic imbalances. Borrowing costs remain low, leaving bond markets with less power to discipline elected officials than at almost any time in recent U.S. history. Absent substantial market pressure, U.S. politicians now have little incentive to risk pain by cutting spending and raising taxes in ways that would substantially reduce the federal debt.
A battle over the debt limit and government spending begins in February. Should Washington not produce a deal in time, the U.S. government would shut down, significant automatic spending cuts would take effect, and the government would default on its debts for the first time. The two sides will eventually have to find a way out of the impasse, but political and market volatility is unavoidable.
Compared with more volatile emerging markets, the downside from even worst-case U.S. scenarios is limited. But in a year when political compromise might have turbocharged growth, that opportunity is likely to be wasted.
On Friday, we'll profile Risk #5: the JIBs -- Japan, Israel, and Britain.
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Note: Today is the third in a series of posts that detail Eurasia Group's Top Risks for 2013.
The Middle East will enter a new phase in 2013. Arab Spring will give way to Arab Summer, as the region faces a series of increasingly complicated overlapping conflicts. As Americans and Europeans resist deeper involvement, rivalries among Saudi Arabia, Iran, and Turkey, competition for influence between Sunni and Shia, a lack of economic progress, and a resurgence of militant groups will each heighten tensions.
Syria remains the central arena of conflict, as Shia powers -- Iran and Lebanese Hezbollah -- on the one side, and Sunni states -- Turkey, Saudi Arabia and Qatar -- on the other compete for leverage. Jihadists have also entered the fray, and turmoil has spilled across the country's borders into Lebanon, Turkey, Jordan, and Iraq.
Emerging conflicts elsewhere are less obvious. Egypt, Tunisia, and Morocco now have moderate Islamist governments. In Jordan and Kuwait, Islamist opposition groups threaten the governing dominance of secular administrations. But while the words and actions of mainstream parties like Egypt's Muslim Brotherhood and Tunisia's Ennahda make headlines in the West, the more serious risk comes from militant organizations that threaten the ability of new leaders to govern and maintain security.
Fueling this trend is the reality that, across the region, new leaders are trying to consolidate power and build popularity at a time when complicated economic problems demand solutions that will make large numbers of people angry. New governments in Tunisia, Libya, Egypt, and Yemen will last only if they can deliver tangible economic progress for an increasingly frustrated and impatient public.
The risk that a Salafist or jihadist group can exploit these frustrations to seize power in 2013 is low, but groups like al Qaeda in the Islamic Maghreb, al Qaeda in the Arabian Peninsula, al-Shabab, and smaller affiliates continue to attract support and new followers by using resentments against local regimes to foster anger at America and the West.
But Iraq may become 2013's newest hotspot. Sunni-Shia tensions are growing, and none of Syria's neighbors is more vulnerable to the threats created inside that country by radical Wahhabi clerics, often with Saudi or Qatari support, now fueling the emergence of an increasingly radicalized and militarily experienced Salafist movement. The Kurdish regional government is becoming more aggressive in promoting its energy development agenda at Baghdad's expense, and Sunni-led violence inside the country might well encourage Iraq's Shia-led government to forge closer ties with Tehran, antagonizing the governments of Saudi Arabia and Turkey.
The Obama administration wants to focus on domestic challenges and an ongoing foreign policy shift toward Asia. But regional rivalries are heating up, and Americans and Europeans will only add to the uncertainty by keeping their distance -- in hopes that they don't get burned.
On Wednesday, we'll profile Risk #4: Washington Politics.
Note: Today is the first in a series of posts that detail Eurasia Group's Top Risks for 2013.
Since the onset of the financial crisis in 2008, investors and companies have focused mainly on risks in developed world markets. But as conditions in the U.S. and Europe continue to improve in 2013, the most worrisome risks will again come from emerging market countries. These countries are fundamentally less stable than their developed world counterparts, and some of their governments used a period of favorable commodities prices and the benefits from earlier reform to avoid the tough choices needed to reach the next stage of their political and economic development.
Some of these emerging market nations face more difficult challenges than others, and much depends on the degree of political capital each leader will have in order to make unpopular but necessary changes. These countries can be divided into three broad categories according to the complexity and immediacy of the risks they face and the longer-term upside they offer.
The first category includes the best bets:
The second category of emerging market economies are at risk of considerable volatility.
Lastly, there are the underperformers, those countries where risks will overshadow returns.
On Friday, we'll profile Risk #2: China vs Information.
HOANG DINH NAM/AFP/Getty Images
By Ian Bremmer
A few days ago, I took a quick, informal survey around Eurasia Group on power and global politics. The question: Who are the world's most powerful people? We're defining power as "a measure of an individual's ability to (singlehandedly) bring about change that significantly affects the lives and fortunes of large numbers of people."
Here's what we came up with:
1. Nobody -- In a G-Zero world, everyone is waiting for someone else to shoulder responsibility for the world's toughest and most dangerous challenges. The leaders you'll see named further down this list are preoccupied with local and regional problems and don't have the interest and leverage needed to take on a growing list of transnational problems.
2. Vladimir Putin -- In Russia's personalized system, this is still the person who counts. He isn't as popular as he used to be, and his country has no Soviet-scale clout or influence, but no one on the planet has consolidated more domestic and regional power than Putin.
3. Ben Bernanke -- The world's largest economy is still struggling to find its footing. To help, no one has more levers to pull and buttons to push. The world needs the U.S. economy back on its feet, and Bernanke has more direct influence than anyone else on when and how that happens.
4. Angela Merkel -- For the moment, her commitments are the glue that binds Europe. Merkel's ability to bankroll Europe's emergency funds, win concessions from the governments of cash-strapped peripherals, and maintain solid popularity at home continues to be a remarkable political and policy achievement.
5. Barack Obama -- Even at a time when Washington is focused almost entirely on Washington, the elected leader of the world's most powerful and influential country carries a lot of water. The Obama administration will watch the eurozone from the sidelines and keep commitments in the Middle East to a minimum, but America will continue to broaden and deepen security and commercial relationships in East Asia, and Obama's decisions on how far and how fast to move will be crucial.
6. Mario Draghi -- Europe's backstop. Europe's Central Bank has kept the continent's blood flowing at a crucial moment in its history, and his work is far from done.
7. Xi Jinping -- China's forward progress is the world's most important variable, and Xi Jinping is now the man behind the wheel. Over the next decade, economic and political reforms will be needed to keep China on track, and Xi will make some difficult (and profoundly important) decisions.
8 (tie). Ayatollah Khamenei -- The supreme spiritual and political authority in a country at the heart of a volatile region. Halfway through 2013, Ahmadinejad will give way to a new president, but it is still Khamenei who will decide how the international fight over Iran's nuclear program plays out -- and what the future holds for the Islamic Republic.
8 (tie). Christine Lagarde -- The world's fire marshal. Here is that rare leader whose contribution will be crucial in multiple regions at once. But nowhere will the IMF's work be more important than in keeping Europe on track.
10. King Abdullah Bin Abd al-Aziz -- King of a kingdom with a unique power to move markets. The Saudi monarch is not in the best of health, but the choices he makes in determining who lead the world's hydrocarbon powerhouse into the next generation will help shape the entire global economy for many years to come.
What do you think?
Ian Bremmer is president of Eurasia Group.
ALEXEI NIKOLSKY/AFP/Getty Images
Eurasia Group's weekly selection of essential reading for the political risk junkie-presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer.
Must-Reads1. "South Korea's Presidential Election: A Homecoming"
Banyan Asia blog, The Economist
On Wednesday, Park Geun-hye was named president of South Korea by a small margin, making her the first woman to hold the post in the nation's history. How will her presidency differ from Lee Myung-bak's? What are the implications for North-South relations?2. "The Importance of Shinzo Abe"
Sanjaya Baru, The Hindu
A much more momentous Asian election took place this past weekend, as Shinzo Abe and the LDP returned to power. Many are focusing on the possible conflicts that the election could provoke between China and Japan, but this piece asks: Are Japan and India the "natural partners in Asia?" In light of the conflict over the Senkaku/Diaoyu islands, it seems Japan is pursuing an ABC policy (Anybody But China). Why not India?3. "Pakistan: Mullahs and Militants Keep Polio Alive"
Sami Yousafzai, The Daily Beast
The eradication of polio has been tantalizingly within reach, as its presence has dwindled to just a handful of countries. But wiping the disease out of Pakistan comes with substantial risks. This piece focuses on the dangers to the anti-polio mission in the wake of Bin Laden's death and the role that vaccinations played in gathering intelligence for the operation.4. "Slavery's Global Comeback"
J.J. Gould, The Atlantic
Another atrocity that hasn't disappeared: human trafficking and forced labor. These are new terms for what Gould still dubs 'slavery.' Even by conservative estimates, there are more people enslaved today than at any point in history. This is an epidemic that needs global attention.5. "The Putin Show"
Brian Whitmore, Power Vertical Blog
If there were a foreign-policy edition of People magazine, Putin would fill the pages. Why all the hype for his most recent press conference? Consider analysis of his performance as our guilty pleasure political risk story.
Longer Reads6. "Utopia for Beginners: an amateur linguist loses control of the language he invented"
Joshua Foer, The New Yorker
This piece is not political per se, but the treatment of language as an art -- communicable and easily repurposed the world over -- has global as well as philosophical implications. Foer follows a man who spent 34 years inventing a language designed to more precisely mirror reality. The story of who ended up co-opting it -- for political purposes no less -- makes for a fascinating read.
By Carsten Nickel
It's a trick not every political leader can pull off: put some 420 billion euro on the European table to protect Europe's weakest economies from default and remain your country's most popular politician. That's what Angela Merkel has managed. Despite having made unpopular concessions to Greece only a few days earlier, delegates of her Christian Democratic Union (CDU) re-elected her as party leader with close to 98 percent support last week. Her public approval ratings remain north of 60 percent, and the trust that German voters have in Merkel's management of the eurozone crisis puts the Chancellor and her party in a strong position ahead of general elections next September.
The reason behind these impressive figures is that Merkel's mix of strong commitment to Europe on the one hand and the push for structural reform in southern Europe on the other exactly reflects the policy preferences of the average German voter. Divert too far from this path to the right, as Merkel's junior coalition partner, the Liberals, attempted in some regional election campaigns last year, and German voters will punish you for your lack of European solidarity. Step too far to the left, like opposition Social Democrats (SPD) have tried with calls for Eurobonds and a debt redemption fund, and voters lose trust in your ability to defend the German taxpayers' interests. In the middle stands Merkel. Her calm, approachable persona and her centrist incrementalism have persuaded German voters that two conflicting goals can be achieved: Save Europe and limit the financial burden on Berlin.
With strategic clarity, Merkel has also drawn the right conclusions from the decline of her former coalition partner, the SPD. Social Democrats still suffer from the disappointment caused by the supply-side reforms introduced under former Chancellor Gerhard Schroeder during the early 2000s. The party's vote share has halved over the last 15 years. In response, Merkel maintains a centrist political position, enabling her to form coalitions with the Liberals, the SPD, or potentially even the Greens. And by offering little opportunity to attack her along the clear-cut lines of left-right politics, Merkel makes sure that traditional SPD voters do not return to the polls anytime soon, denying the party an easy way out of its misery.
Ahead of the 2013 elections, Merkel is therefore unlikely to come under pressure to depart from her current policies. The negative result is that silver-bullet solutions for the eurozone crisis remain unlikely and structural problems such as intra-eurozone imbalances will not be addressed. On the upside, investors in Germany will find it reassuring that the country's high-productivity export model is unlikely to be challenged by calls for demand-side policies. German companies will therefore remain in a strong position to compete for market share in emerging economies across the globe. In Berlin, meanwhile, only one politician wins: Angela Merkel.Carsten Nickel is an analyst in Eurasia Group's Europe practice.
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By Daniel Kerner and Risa Grais-Targow
The Bolivarian revolution in Venezuela is rapidly approaching its biggest test yet: The defiant Hugo Chavez, the man who has personified Venezuelan politics for 14 years, has publicly admitted that his days as president may be numbered. His movement has a slight edge in elections that are likely to be called within months, but much will depend on the president's ability to transfer his personal appeal to his chosen successor.
Throughout multiple treatments for what appears to be cancer, Chavez had refused to publicly acknowledge that he may be too weak to lead his country. But on December 8 he announced that he would need a fourth round of surgery in Cuba, and named Vice President Nicolas Maduro as his successor, setting in motion plans for a potentially rapid transition.
According to the Venezuelan constitution, new elections must be held within 30 days should the president be forced to step aside before inauguration day (January 10) or during his first four years in office. Maduro would likely face Miranda Governor Henrique Capriles Radonski, whom Chavez defeated by about 10 percentage points in the October 7 presidential election.
Anointing a successor is a clear admission by Chavez that he is unlikely to complete his six-year term, making an election inevitable. There are three main reasons the government will likely call for a vote as soon as possible.
The future of Chavismo depends on Chavez's ability to transform a movement that is largely based on a cult of personality to one that can survive without him in perpetuity. Chavez remains popular, despite the fact that a majority of the public thinks poorly of the government's ability to solve problems. Chavez therefore needs to aggressively make the case to the Venezuelan people that Maduro has the talent and vision to carry on the revolution. Chavez's ability to campaign for Maduro is uncertain, but it will only lessen with time.
Second, foreign exchange dynamics are untenable for much longer. The country has an unorthodox three-tiered exchange system, with two different official rates for businesses and individuals needing dollars, as well as a parallel (illegal) rate. Black-market rates indicate that the bolivar should be much weaker than it is in the official windows, and dollars are becoming increasingly scarce.
The government would likely prefer to hold fresh elections before a devaluation, which would propel already-high inflation and be politically costly for Maduro's candidacy. In the meantime, the government can rely on domestic and foreign debt issuance to meet fiscal and foreign exchange needs to buttress the political environment in Maduro's favor.
Finally, Chavismo wants to capitalize on an opposition that remains weak and divided following Capriles Radonski's defeat, by forcing it to compete before an official candidate selection process can take place. Capriles Radonski faces a gubernatorial election on 16 December, which he is likely to win. But if he does not, the opposition will have to scramble to coalesce around a new candidate in a short amount of time.
That said, the opposition is likely to take advantage of its best chance to win since Chavez came to power by uniting around a single candidate. It is far from certain that Chavez will be successful in transferring his personal appeal to Maduro, but Chavismo retains a slight edge in the coming election.
Regardless of who wins, Venezuela faces a very challenging 2013. Maduro would be forced to make difficult economic adjustments and manage divisions within Chavismo. An opposition president would have to make the same adjustments before setting out on a reform course, but would face even more obstruction from Chavismo stakeholders across the state apparatus.
Daniel Kerner is an analyst in Eurasia Group's Latin America practice. Risa Grais-Targow is an associate in the firm's Latin America practice.
By Stephanie Haffner
Since the start of Europe's sovereign debt crisis, tension has risen in the eurozone as a result of the growing economic divide between the group's northern and southern members. The response to the debt crisis was an ugly trade: Northern countries financed southern debts, but in turn imposed harsh austerity and economic reforms. The policies, however, have triggered ongoing protests that could morph into rising resentment from populations in southern EU member states, and extremism.
The belief in Berlin, Helsinki, and other northern European capitals is that austerity will eventually lead to competitiveness, fiscal sustainability, and growth for southern economies as well as the EU as a whole. So far these hopes remain unfulfilled. In fact, continued austerity will spur increasing resentment and a growing divide that could boost the popularity of extremist parties and threaten the European project. This dynamic will be helped along by a looming identity crisis for mainstream political parties in Europe's southern states, where distinctions between the left and right have begun to blur as sovereignty is further undermined and spending cuts drive domestic policies.
Assuming responsibility for southern debt has allowed Europe's northern countries to essentially take control of fiscal policy throughout the EU. This result has eroded the sovereignty of southern European countries, and that process will be further exacerbated by increased policy centralization at the EU level and the move toward fiscal mutualization. As the eurozone's monetary union is strengthened, fiscal instruments (such as Eurobonds/bills) that rely on pooling fiscal risk with greater burden-sharing could end up being exchanged for even more centralized control of economic policy. And new EU legislation, such as the so called two-pack and six-pack, which give national budgetary oversight power to the European Commission, will permanently lock in austerity
Centralized policymaking at the EU level will further exacerbate the political imbalances between the EU's northern and southern members. The northern states' growing role as the policymakers of the EU means that the south will lose the ability to significantly influence EU-level policies. The traditional democratic deficit that exists between the European Parliament and European citizens is thereby transformed into a deficit between southern European citizens and northern European governments, which is arguably a far more critical divide.
But there is a way to avoid such a mess. Economic integration is clearly necessary to resolve the crisis, but politicians are lagging in their efforts to present a long-term vision for Europe's political and economic future as a union. Policymakers should consider shifting their narrative from one that emphasizes oppressive austerity to one that highlights the importance of solidarity and political integration. This goal may require a new treaty to address the lack of political representation and democratic accountability that has come to characterize much of the current response to the crisis. But the failure to address these important issues will not only diminish the voice of southern Europe and its citizens, but could also heighten the risk of a breakdown in the European experiment.
Stephanie Haffner is a researcher with Eurasia Group's Europe practice.
Vladimir Rys/Getty Images
By Anjalika Bardalai
On the face of it, India and the US have more differences than similarities: They diverge markedly in terms of income and a host of other qualitative and quantitative indicators. They seem like political opposites as well-one is a two-party presidential system, the other a parliamentary system comprising no fewer than 70 recognized parties (the newest was launched just this week). But Mitt Romney's defeat in the recent US presidential campaign has highlighted several weaknesses of the Republican Party that are mirrored in India's center-right national party, the Bharatiya Janata Party (BJP), which has been the main national opposition party since its spectacular loss in India's 2004 general election.
Most critically, both parties exhibit a split between a conventionally center-right, business-friendly faction and an overtly religious faction that tries to politicize social issues. In the US, the extremely conservative stance of a few Republicans on issues such as rape and abortion periodically overshadowed the presidential campaign and arguably alienated potential voters who favor the right's economic policies, but who found its social policies abhorrent. The BJP, too, exhibits a fault-line between one faction that is secular, pro-business, pro-economic reform, and (relatively) fiscally conservative, and another wing-the hardline "Hindu-nationalists."
The GOP's hardline stance and rhetoric on immigration reform in the US contributed to an extremely poor showing for the party among Hispanics, the fastest-growing minority group in the US. Similarly, the consequences for the BJP of the Hindutva influence are grave, and will become ever more so as rising incomes inevitably weaken the bonds of religious, ethnic- and caste-based identity in India. For one thing, the BJP's perceived pro-Hindu stance means that it will be all but impossible to make serious electoral inroads among the roughly 15% of India's population that is Muslim.
In addition, the BJP's position is a serious liability in terms of its ability to form alliances with India's myriad regional parties. In an increasingly fractured political system, this could be an utterly debilitating political handicap. As a debate raged this week about whether or not a symbolic parliamentary confidence vote would be held on a the government's recent move to liberalize FDI in the retail sector, the BJP was unable to persuade key parties that are stridently opposed to the reform that they should side with it in a vote against the government. As much as they may fear the recent liberalization, the other parties may fear what they have termed the "communal forces" represented by the BJP even more.
The broader consequences of the BJP's schizophrenic identity are no better. In the absence of a strong, coherent policy platform, the party has relied on sheer obstinacy and obstructionism, preventing the legislature from attending to important legislation (some would argue echoing the behavior of the Republicans in Congress for much of the recent past). The Indian government certainly cannot be absolved of responsibility for the current disastrous policymaking environment, but the main opposition party is behaving irresponsibly.
Finally, the division between the secular and religious right complicates the choice of party leadership. Some analysts argued that with public approval of Obama relatively low and, crucially, the US economy still relatively weak, the presidency was the Republicans' to lose if only the party had been able to muster a stronger candidate than Romney. In India, the BJP has yet to anoint a prime ministerial candidate for the next general election, which is due by May 2014. The man widely hailed as the front-runner is the chief minister of the state of Gujarat, Narendra Modi. Having presided since 2001 over one of India's fastest-growing and most industrialized states, he has developed a sterling reputation for economic management and as such is well-placed to campaign on the main issue of the day: economic revival.
Unfortunately for him, however, he is also one of the country's most divisive figures, with a shadow still hanging over him from communal riots in the state in 2002 in which around 1,000 people-75% of them Muslims-were killed. Even if he prevails in the BJP's internal leadership struggle, this potentially bodes ill for the party's electability in 2014. The BJP urgently needs to reflect on finding a leader who could bring to the table both economic management and political cohesion. Both the Indian BJP and the US GOP have similar lessons to learn from recent history as they attempt to stake out a brighter political future.
Anjalika Bardalai is an analyst in Eurasia Group's Asia practice.
SAM PANTHAKY/AFP/Getty Images
By Roberto Herrera-Lim
It's easy to disparage Vietnam, whose reputation as the poster child for the economic potential of frontier market countries has taken a beating in recent years. Inflation is a persistent threat, growth is slowing, and the country's banks and state-owned enterprises (SOEs) are struggling with a potentially destabilizing level of bad debts. And to top it all off, Vietnam's political leaders are fighting among themselves when the situation calls for firm action. As a result, foreign investors are left scratching their heads and wondering if Vietnam will be able to build the institutions and capabilities needed to move into the ranks of the emerging market nations.
Vietnam's institutions were not prepared for strong growth. That much is clear from the crisis that has played out over the past few years during which Vietnam's institutions and leaders mismanaged capital inflows, resulting in inflation, bad investment decisions, and near-rogue banks and SOEs. All this occurred on Prime Minister Nguyen Tan Dung's watch, and while he has survived at least two challenges to his leadership, he is weakened and chastened. As a result, consensus decision-making will play a greater role in coming years, while Dung's competitors (including President Truong Tan Sang) reduce his control over policymaking and tighten oversight. The near-term consequence of this dynamic will be a greater likelihood that factional competition will result in uneven policies and conflicting signals.
But don't count Vietnam out of the game yet. Historically, crises have been effective at forcing effective policy choices from the government (such as the 2001 ouster of the party's then general secretary Le Kha Phiu). The current situation is unlikely to result in Dung's exit, but it will spur a serious reexamination of economic policy, especially when it comes to better allocating investment. There is, after all, still a broad consensus among Vietnam's elites that previous reforms should remain in place and that long-term growth and sustained, equitable improvements in the quality of life are needed to ensure the survival of the communist party. The country's economy could also benefit from structural factors that are encouraging investors to consider manufacturing locations other than China.
It may be tempting for manufacturers to look to other countries in Asia, but they should not discount Vietnam's reemergence as a viable investment destination. The country's leaders may be squabbling, but they understand that failure to reform is a larger threat to their primacy than the uncertainty that comes with change.
Roberto Herrera Lim is a Director in Eurasia Group's Asia practice.
HOANG DINH NAM/AFP/Getty Images
By Naz Masraff
With civil war in Syria, turmoil in Gaza, Arab Spring aftershocks, and the still simmering conflict over Iran's nuclear program competing for headlines, it's easy for outsiders to overlook another of the region's most intractable ethnic conflicts-Turkey's internal battle with Kurdish separatists. This story deserves attention, because it remains the primary security threat inside the region's most politically modern and economically dynamic country.
First, some background. In 2010, Turkey began secret talks with the Kurdistan Workers' Party, a militant group better known by its acronym PKK. But in the run-up to June 2011 elections, Prime Minister Recep Tayyip Erdogan brought them to a halt. Erdogan's Justice and Development Party (AKP) won those elections, securing nearly half the popular vote and a third successive term in power, and the newly emboldened prime minister has since adopted a relentlessly hardline attitude on Kurdish questions with a pledge to use Turkey's military to crush the PKK.
Since the beginning of 2011, several thousand Kurdish nationalists have been arrested on charges of PKK membership. In October, public prosecutors in Ankara launched a judicial investigation into the pro-Kurdish Peace and Democracy Party (BDP).
In July, the PKK launched a new phase in its
28-year insurgency, intensifying attacks on Turkey's security forces and
working to create "no go" zones in designated areas in the mountains
near Turkey's border with Iraq. The stated goal is to intensify pressure on
Turkey's government to introduce greater Kurdish language rights and to cede
many of the powers of the central government to local Kurdish authorities in
southeast Turkey in a process Kurdish nationalists call ‘democratic autonomy.'
The PKK scored territorial gains in August and early September and have held on to some of them, and it's clear that the PKK is now stronger than at any time since the 1990s.
Military activity has slowed since mid-October when the mountain passes along its main infiltration and supply routes became blocked with snow. But the PKK then continued its progress by launching a series of hunger strikes inside Turkish prisons, beginning in September with 63 Kurdish inmates. The number of hunger strikers quickly grew to nearly 700 people, including seven members of parliament. Strikers demanded an end to the ban on the use of Kurdish language in courts and as the primary language used by teachers in schools in the predominantly Kurdish southeast. They also called for respect for Kurds' democratic rights and an end to the isolation of PKK founder Abdullah Ocalan, who has been incarcerated on the prison island of Imrali since 1999. In late October, Kurdish nationalist organizations began staging protest rallies across the country, triggering clashes between demonstrators and police, and fights between ethnic Kurds and Turkish ultranationalists in western Turkey. Turkish media, wary of antagonizing the government, downplayed the growing violence-though a few incidents injured too many people to ignore.
Turkey's government was slow to react, at least publicly, and downplayed the strikes. Speaking in October during a visit to Germany, Erdogan insisted that only one of the hunger strikes was authentic and that others were mainly "for show."
Behind the scenes, however, Turkish officials knew they had a growing problem to contain. The PKK now appears to have won concessions on the right of Kurds to defend themselves in court in their native language-that's expected to be adopted in parliament soon-and a step has been taken to eliminate Ocalan's isolation, in part by granting his family a visit. This brought an appeal from Ocalan to halt the hunger strikes, and on Sunday, they came to an end.
Yet, the risk of violence continues, and the turmoil in Syria has complicated matters further. Syrian forces have withdrawn from Kurdish areas in northern Syria, creating a de facto autonomous Kurdish regime over the past few months, and PKK leaders can exploit this power vacuum. For the moment, Turkish authorities want to avoid direct military involvement in Syria's troubles, but a sustained wave of PKK attacks on Turkey's security forces from inside Syria might still change their minds.
If the longer-term underlying issues fueling Kurdish separatism can be resolved, it is only with a comprehensive political process. Yet, Turkey's government -- like governments around the world -- is unwilling to negotiate with militants while they continue to launch attacks. This is particularly the case as Turks may go to the polls as many as four times in the next three years, including for a referendum on the constitution, as well as for local, presidential, and parliamentary elections. On the eve of these polls, the government is likely to adopt increasingly nationalistic rhetoric, shying away from taking steps to resolve the Kurdish issue through democratic means.
In short, the hunger strikes have ended, and the protests may die down. But there will be no peace in Turkey's southeast until the two sides can compromise their way toward a lasting political settlement.
By Carroll Colley
Washington is on the verge of completing an improbable trifecta in U.S.-Russian relations. In August, the Obama administration helped guide Russia across the finish line for World Trade Organization membership. Congress is now fast tracking an end to the Jackson-Vanik amendment, a piece of Cold War-era legislation that ties trade policy to human rights, and one that has remained a bone of contention between Moscow and Washington for more than twenty years. Finally, Congress is also about to establish "permanent normalized trade relations" with Russia.
So why are relations on the verge of a potentially serious turn for the worse-and perhaps a reassessment of the "reset" in U.S.-Russian relations? Because this legislation will also include the so-called Magnitsky Act, which publicly rebukes the Kremlin for its poor human rights record.
Sergei Magnitsky, an attorney investigating a corruption case involving tax fraud charges against a UK-based investment firm, announced he had uncovered evidence of collusion among police, organized crime figures, bankers, and the Russian judiciary to push the company out of business. In November 2008, Magnitsky was arrested on corruption charges and held for 11 months without trial. He then died in prison under disputed circumstances. An independent human rights organization, Moscow Helsinki Group, has accused Russian security of torturing him. Magnitsky's death provoked international criticism, but a defiant Russian government continues with a posthumous criminal case against him.
The Magnitsky Act will publicly name and shame Russian officials involved in the case, bar them from receiving US visas, and freeze any assets they hold in the United States. Moscow, as you might imagine, is incensed. The Kremlin sees the bill as evidence of continued anti-Russian sentiment in the United States - -Mitt Romney's campaign comments about Russia were grist for this mill -- and as an intrusion by the U.S. into Russia's domestic affairs. The House looks set to vote on the legislation tomorrow, the third anniversary of Magnitsky's death. The Kremlin promises to respond to the bill's passage by retaliating in kind.
The Magnitsky Act won't damage President Vladimir Putin inside Russia. He remains Russia's dominant political figure, his approval numbers are strong, and few Russians closely followed details of this case. Yet, Moscow remains extremely sensitive to international charges of human rights abuses and corruption of government officials. That leaders of Russia's nascent opposition movement have endorsed the Magnitsky Act aggravates the Kremlin even more.
Moscow has already floated suggestions for a 'black list' of US officials, including those connected with the extradition and trial of convicted arms dealer Viktor Bout or with the prison at Guantanamo Bay. Of more concern is the likelihood of increased pressure on U.S. industry operating in Russia, including, for example, unannounced tax inspections of U.S. companies, delayed or denied licensing or registration procedures, and other bureaucratic complications.
While the Magnitsky Act will punish those involved in the case, it won't do much to improve Russia's human rights regime in the near term. Several incidents since Putin's inauguration in May demonstrate that the state continues to use force to weaken the political opposition. Russian officials recently announced the arrest of political activist Leonid Razvozzhayev on charges of orchestrating a series of riots. Razvozzhayev insists that Russian security officials kidnapped him in Ukraine where he was applying for political asylum, transported him back to Russia, and gained a confession from him by torturing him and threatening his children. Politically connected murders of journalists and human rights activists are no closer to being resolved.
U.S.-Russian relations are now likely to enter a period of strain and recrimination, though pragmatism on both sides will prevent a total collapse. The U.S.-Russian "reset" was a good idea at the time and produced significant results, but there is only so much it can accomplish with so much continuing mistrust on both sides.
Carroll Colley is an analyst in Eurasia Group's Eurasia practice.
By Crispin Hawes
There are a growing number of signals from Saudi Arabia that the question of when the younger generation of princes will be included in the formal line of succession has been resolved. On 5 November, Prince Mohammed bin Nayef was appointed to succeed his late father as the minister of interior, a decision that is likely the result of a deal between King Abdullah and different branches of the ruling family. As a result of that appointment, an announcement on who will take the second spot in the succession is likely to come soon.
Mohammed's appointment to head the Ministry of the Interior is the latest move in an extended process aimed at setting out the ruling family's plans for the long-term succession. Prince Mohammed replaces his uncle Prince Ahmed at the ministry after a truncated term. Prince Ahmed was likely moved aside, despite official statements that he had asked to relinquish the post, and that hints at a decision on the succession. Defining the long-term line of succession requires public consensus among senior family figures, and Ahmed's recent public statements suggested that he was pushing to succeed Crown Prince Salman, who is set to take the throne on Abdullah's death. Saudi Arabia's opaque internal politics make interpreting what is happening behind the scenes very difficult, but Ahmed's replacement as interior minister could well have been triggered by his opposition to developments in the line of succession. If Abdullah has decided to appoint Prince Khaled al-Faisal as second deputy prime minister, the position occupied by the second in line, Ahmed's opposition would be enough to force his departure.
Abdullah seems intent on defining a long-term plan for the succession in an effort to prevent the kingdom from instability if, as is possible, there is a rapid series of deaths among the current and elderly ruling generation. The transition to the generation of Mohammed and Khaled al-Faisal, grandsons of Abd al-Aziz Ibn Saud and modern Saudi Arabia's founder, has been the subject of speculation for years. Faisal is in his early 70s, only a few years younger than Salman, but the move is a very significant one.
Mohammed's promotion is likely part of a broader compromise between the king and the dominant Sudairi branch of the family. Again the details are impossible to confirm, but it is likely that the Sudairis have retained the interior ministry in return for agreeing to allow the insertion of the moderate Khaled al-Faisal (and not a Sudairi) in the line of succession. If that is indeed what is happening, there will almost certainly be a number of other deals emerging in coming weeks and months that will set the stage for other members of the next generation, including King Abdullah's son Mitaeb, to move into more prominent positions.
Crispin Hawes is the director of Eurasia Group's Middle East practice
JIM WATSON/AFP/Getty Images
By Shaun Levine
Joko Widodo's win in the September 21 Jakarta mayoral election was a momentous step forward for the forces of reform in Indonesia's increasingly stagnant political scene. The luster will soon wear off, however, unless Widodo can translate his victory into fixing the mess he has inherited: failing infrastructure, immovable traffic, water supply issues, and a rebellious regional government, just to name a few. If his time as mayor of the small town of Solo is any indication, Widodo may be up to the challenge. Widodo improved Solo's transportation networks and governance, and reduced the level of corruption endemic in Indonesian politics. However, in order to effect change in the big city of Jakarta, where he is now a de-facto national leader, Widodo will need to roll up the sleeves of his signature checkered shirts.
Widodo's victory could be an important turning point for Indonesia. The early head-first rush into democracy and reformism in 1998 has given way to the patronage politics so common during the days of Suharto. Bureaucratic reforms, the fight against corruption, and attempts to improve governance have largely come to a standstill -- which largely benefits the remnants of Suharto's New Order regime that cling to power and look set to compete with one another in the 2014 presidential election. President Susilo Bambang Yudhoyono's ten-year mandate is coming to an end, with the early promise of reform having been snuffed out by reactionary forces. Even with the backing of more than 60 percent of voters, change and reform have not been easy for Indonesia's first directly elected president.
Going forward, Indonesian voters will have to choose between elevating new reformers such as Widodo, who himself may become a presidential candidate in 2014, and the crop of leaders from the New Order who see 2014 as a must-win election; most may be too old to compete in 2019.
For these leaders, Widodo's win -- which appeared unlikely at the start of the campaign in the early summer -- should be seen as a wakeup call. The proven tactic of pandering to voters, and in some cases buying their votes, may not be the panacea it was in the past. Neither will efforts to translate a growing sense of confidence in Indonesia's future, based on its international standing and strong economic growth, into economic nationalism. Voters are well aware that the reform movement has largely stalled, and that current leaders want to chip away at democracy so that regional governors like Widodo are appointed and not elected.
But the real impetus is on Widodo and his like-minded counterparts, who have overcome the hurdle of reaching office but will now face the bureaucratic challenges, and temptations, of the reformers that came before them. Promises made on the campaign trail mean nothing when gridlock and animosity seek to undermine reform; compromise is a hallmark of democracy, but not when it benefits the few to the disadvantage of the many.
Against all odds, Widodo was able to show that honesty and a proven track record of reform could overcome overwhelming challenges in campaign financing and political party support. The win also demonstrates that Indonesian politics, which is mired in patronage and money, doesn't have to remain so. This is a democracy that will have its fits and starts, but will more than likely rise up to become a leader in the global community commensurate with its population and wealth.
The presidential election in 2014 is likely to be the last for the Suharto-era leaders, many of whom have witnessed Widodo's victory with envy and some of whom have even benefited from supporting his campaign. The chances of a dark-horse candidate such as Widodo winning in 2014 are still slim. But voters' choice in the Jakarta mayoral election has moved Indonesia a step closer to realizing its much-heralded democratic and economic potential.
Shaun Levine is an analyst in Eurasia Group's Asia practice.
By Crispin Hawes
Iraqi Prime Minister Nouri al Maliki is losing patience with his fractious coalition and is trying a number of tactics to force it into line, including ceding concessions on some contentious issues designed to win over Sunni factions and weaken political opponents. The current political impasse has delayed much legislation, preventing progress on issues such as ongoing power shortages that are damaging the economy and the quality of life for most Iraqis. While Maliki has threatened to call new elections in an effort to sway his coalition, a vote is unlikely this year, as is any long-term easing of the current political impasse. A vote is possible, however, in 2013, one year before the next elections are currently scheduled.
Maliki continues to perform well in Iraq's limited opinion surveys, despite strong negatives in some parts of the country. His relative popularity results from his reputation for forceful government, and Maliki now views the legislative deadlock as a major problem that could undermine his position. As a result, Maliki wants his coalition to pass important legislation and has shifted his focus from backroom negotiations to openly confronting his political partners and rivals.
Maliki is also preparing the ground for elections. His chief tactic has been to allow the reinstatement of Sunni officers in the military and security forces, a decision reached in June and intended to ameliorate some of the anger among Sunnis. Maliki is not allowing across-the-board reinstatement and instead has instructed the military to focus on recruiting expelled officers from Anbar province. The political goal is to undermine support for the main political opposition Iraqiya.
Maliki has threatened snap elections, in large part to spur his coalition into action. He can do this because opinion polling indicates he would have won an election held in July this year, while some of his most fractious allies and opponents would have performed particularly badly.
The tactic may well result in some legislation being approved, a step that could add further gloss to Maliki's reputation for forcefulness. But a resolution on important issues, such as the long-running dispute between the Kurdistan Regional Government (KRG) and the Baghdad government over the legality of disputed oil contracts, will almost certainly be delayed until the next government. And even if some legislation is approved in the near term-which would be enough to delay any snap general election-structural issues will encourage tensions to eventually resurface.
As a result, Maliki is unlikely to make good on his threat to call elections this year, but is actively considering calling early polls in 2013. Despite his skepticism of opinion surveys, the consistent results could tempt him to schedule a vote a year ahead of schedule in an effort to maintain his position atop the delicate balance of forces in Iraq. Early polls would probably also favor his more coherent State of Law party list over other coalitions, such as Iraqiya.
Crispin Hawes is the head of Eurasia Group’s Middle East and North Africa practice.
Wathiq Khuzaie/Getty Images
By Crispin Hawes
The death of Saudi Arabia's Crown Prince Nayef bin Abd al-Aziz, though unsurprising, highlights the risk of policy stagnation, an issue of some significance for the Kingdom given its domestic challenges.
As expected Nayef's full brother and appointed successor, Minister of Defense and Aviation Salman bin Abd al-Aziz, has been anointed as Crown Prince. But the current generation of princes-the sons of the kingdom's founder, Abd al-Aziz Ibn Saud-is facing the end of its period in power, which has lasted since their father's death in 1952. There are a few potential candidates to succeed Salman, but the most obvious choices are the Deputy Interior Minister Ahmed (a full brother of Salman and Nayef), Muqrin, a longtime ally of King Abdullah and the General Director of the Saudi Intelligence Agency, and Sattam, Governor of Riyadh.
In broader policy terms, the government will delay any potentially controversial legislation or regulatory reforms. Moreover, there are unlikely to be any significant external or internal policy changes in the coming months. The Saudi regime will want to consolidate power and send a strong message (to both supporters and enemies) that stability will be maintained.
The longer-term danger is that more frequent changes to the succession driven by the age of the current princes will make policy stagnation more likely, creating significant political and economic risk. The Saudi Arabian economy faces considerable challenges and social discontent over economic issues, such as growing unemployment. The current response relies on spending to drive growth and legislative changes aimed at forcing employers to hire more Saudi nationals. These policies are unlikely to address the Saudi economy's significant issues. And as age claims more of the princes in coming years, the likelihood of successive policy freezes makes the adoption of more effective policies even less likely. That outcome would likely open the door to growing social tension and stresses in Saudi Arabia, a regional lynchpin and a vital source of energy for the global economy.
Crispin Hawes is the director of Eurasia Group's Middle East practice.
HASSAN AMMAR/AFP/Getty Images
By James Fallon and Ayham Kamel
On May 21, the Lebanese Armed Forces shot and killed prominent Sunni Sheikh Ahmed Abdul Wahed as his convoy passed through a checkpoint, triggering gun battles in Beirut's Tariq al Jdeideh neighborhood between two Sunni political parties, the anti-Syrian Future Movement and the pro-Syrian Arab Movement Party. The fighting followed clashes between Alawites and Sunnis in Tripoli in response to the arrest of Shadi al Mawlawi, a Sunni Salafist activist accused of aiding the Syrian opposition. Clearly, Syria's troubles have crossed the border into Lebanon.
In fact, Syria's turmoil is polarizing Lebanese factions and threatening the country's delicate political balance. Conflict in Syria has fallen largely along sectarian lines, and it is now fueling sectarian tension in Lebanon. The majority of protesters facing daily violence from the Syrian regime are Sunni, and this has driven moral and material support for their cause from Lebanon's mainly Sunni north. To avoid confrontation with his Sunni community, Prime Minister Najib Mikati has not actively interfered to stop such assistance, creating a perception that his government is at least tacitly complicit in supporting rebels.
Ironically, the one cross-sectarian institution in Lebanon that many consider capable and trustworthy -- the country's armed forces -- is a problematic tool for ending street violence between Lebanon's political parties. On the one hand, the sectarian diversity within the army gives it some level of credibility with all of Lebanon's various factions. In fact, in May 2008, when Hezbollah gunmen fought Sunni militias for control of mainly Sunni neighborhoods in west Beirut, the army helped defuse tensions on both sides -- greatly bolstering its credibility and national popularity. Yet, then as now, the army could not directly intervene to stop the bloodshed, because the sectarian fault lines that run through the country's politics and society are also apparent within its ranks. Prime Minister Najib Mikati knows that if he calls on them to engage directly, there's a risk that soldiers will join the various fights instead of breaking them up.
Recent unrest is exacerbating this fear. During clashes on May 21, Sunni gunmen directed their fire at the army. Following the checkpoint shooting, the army withdrew from some positions in the north, and several Sunni politicians called for a more permanent expulsion. The military's response was measured, but the rise of militant factions in northern Lebanon is making it much harder for the army to intervene in battles in which its soldiers may feel they have a stake. These conditions could be an indication that the army's tenuous role as super-sectarian arbiter is deteriorating among some Lebanese, particularly the Sunni population. As the Sunni-dominated northern region of Tripoli and its surroundings continue to serve as a logistical base for Syrian rebels, we'll probably see more of these clashes, and the government's ability to deploy forces without risking its credibility will definitely diminish.
Political instability is likely to rise in Lebanon as the Syria crisis worsens, and efforts better spent on the already difficult task of governing will be redirected toward buttressing the fragile balance necessary to maintain any government at all. Lebanon's political institutions have proven resilient in the face of serious challenges over the years, but that resilience is often the result of choosing to do nothing that might fan the country's flames.
Inaction may avoid making matters worse, but it does little to resolve the underlying causes of persistent instability in Lebanon.
James Fallon is an associate with Eurasia Group's Middle East practice. Ayham Kamel is an analyst in the firm's Middle East and North Africa practice.
By Damien Ma
Though the curious case of blind Chinese dissident Chen Guangcheng has badly embarrassed China's leaders, it has provided them one important benefit -- it has diverted attention from the far more dangerous story of Bo Xilai. Regardless of the outcome in either case, the Communist Party's image has been badly tarnished. For a Chinese government that seems bent on investing in soft power, these last few months have offered clear reminders that soft power cannot be bought. It must be earned.
For a Chinese government that prefers to keep its differences behind closed doors, the Bo Xilai episode is a nightmare, in part because the involvement of the U.S. and British governments in the case has brought an unusual degree of international media scrutiny. (One of Bo's deputies briefly took refuge in the U.S. embassy, and Bo's wife has been implicated in the murder of a British businessman.) China's familiar tools of propaganda have been overwhelmed by frenzied speculation about the case in the Western press and China's social media echo chamber -- yet another reminder that Beijing can no longer afford to ignore Sina Weibo, China's version of Twitter.
The party leadership has dismissed the Bo Xilai saga as a sideshow and Bo himself as an aberration within the country's otherwise upstanding roster of senior officials. But little of China's blogosphere appears to be buying it. Instead, Bo's story signals for many that China remains a corrupt and opaque place, that the unbridled capitalism practiced in China has mainly benefited politically-connected VIPs, and that greed has infected the leadership right to the top.
And though the drama surrounding Chen Guangcheng has given the public something new to speculate about, in some ways, the story reinforces the cynicism that Bo Xilai has exposed. Chen and Bo -- a powerless and once illiterate legal activist and a powerful political scion who long stood above the law -- seem polar opposites. But they have something important in common; both were left without a place to hide when the leadership decided they should be punished.
Few within the country believe that Bo or his wife will have their day in court, reinforcing public fear that average citizens have no real protection within a system manipulated for the benefit of the party. That Chen, like Bo Xilai's deputy, first sought sanctuary in the U.S. embassy underscores a point not lost on the Chinese public: The United States, not China's own government, offers protection of last resort in times of political turmoil.
These stories are engendering a growing trust deficit between the government and the informed public -- the very elites that the party counts as its crucial constituency. A perception of systemic "rot from within" and the lack of legitimacy it implies undermine the regime's monopoly hold on domestic political power.
Despite Premier Wen Jiabao's constant talk of political reform, the last decade of the Hu Jintao/Wen Jiabao administration saw an economy that raced ahead and a political system that changed very little. But to repair this latest damage to its "brand," the party may feel it has to produce some real change. Some within the leadership are already using this opportunity to push for political liberalization. In his closing arguments as premier, an increasingly legacy-conscious Wen Jiabao is making a final pitch for real political reform. But Wen is a lame duck.
Over the course of the next few months, China will introduce a new generation of top leaders. Any political changes they might produce are unlikely to fundamentally recast Chinese politics or to appear soon. But they may soon find that delivering go-go growth is no longer enough. They may find that, particularly in the online public square provided by social media, a growing segment of China's people will expect a new degree of accountability -- and a new kind of change.
Damien Ma is an analyst in Eurasia Group's Asia practice.
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The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.